ANZ move another blow to consumers

ANZ has jacked up its variable mortgage by 39 basis points, a move that is likely to
further jar consumer confidence heading into what could be another tough Christmas
for retailers.
While the ANZ rate increase is smaller than the Commonwealth Bank's 45 basis point
lift in lending rates, it was substantially above last week's Reserve Bank official
25 basis point rise.
"Raising lending rates is never an easy decision ... (but) the intense competition
for deposits and high wholesale funding costs is a very real," ANZ CEO Australia
Philip Chronican said.
However, the bank said it was dumping its mortgage exit fee.
Data released before the ANZ's decision showed consumer confidence had taken a hit
from the Reserve Bank's largely unexpected rise in the cash rate, and the
Commonwealth Bank's super-sized move.
The Westpac-Melbourne Institute consumer sentiment index fell 5.2 per cent in
November, with confidence among people holding a mortgage dropping 6.8 per cent,
compared to just a 3.1 per cent fall among renters.
While Westpac chief economist Bill Evans had expected a significantly larger fall
based on previous reactions to rate increases, he felt there could be some confusion
among borrowers as not all banks have put up their rates so far.
"Once the other major banks clarify their polices, which will presumably be before
the next survey in early December, there may be a follow up response from
households," Mr Evans said.
Surprisingly, National Australia Bank and Westpac have not shifted their rates a
week after the official rate rise.
But it doesn't bode well for Christmas shopping.
Additional questions in this month's consumer sentiment survey found 34 per cent of
respondents plan to spend less on gifts this Christmas than they did last year, with
53 per cent spending the same.
"The general mood leading into the Christmas sales season ... is not particularly
upbeat," Mr Evans said.
"(It) suggests retailers may be in for a repeat of the lacklustre spending in
Christmas 2009."
Demand for mortgages also remained at a modest pace, even before this latest round
of rate rises.
In other data on Wednesday, the Australian Bureau of Statistics said 48,333 home
loans were granted in September, a 1.3 per cent seasonally adjusted increase over
the previous month.
"We suspect that the number of new home loan commitments will continue to rise in a
subdued fashion over the near-term, with policy tightening from the (Reserve Bank)
putting a firm ceiling on any reacceleration of the housing market indicators," JP
Morgan economist Ben Jarman said.
Growing job security has failed to stop the souring mood among consumers.
Thursday's labour force report for October could well see the jobless rate drop to
5.0 per cent for the first time in nearly two years, according to economists.
The federal government's mid-year budget review released on Tuesday forecast
unemployment falling even further to 4.5 per cent in the coming 18 months as an
additional 380,000 people join the workforce.
At the same time, the government's leading employment index released on Wednesday
rose for a seventh straight month in November.
"This confirms that employment can be predicted to grow more quickly than its
long-term trend rate of 2.2 per cent per annum in coming months," the Department of
Education, Employment and Workplace Relations said.
Employment growth was upgraded to 2.5 per cent for the 2010/11 financial year in
Tuesday's Mid-Year Economic and Fiscal Outlook.